As 2017 proceeds, a clearer picture of the true value of blockchain in the financial industry is starting to appear. Areas such as trade finance, cross-border payments and KYC/AML are rising to the top of the list of applications for distributed ledger technology in financial services. As banks look for opportunities to increase efficiency, cut costs and improve customer service, there’s also potential for banks to explore new business opportunities, perhaps most notably in the area of identity.
In this context, it’s worth highlighting how Emirates Islamic Bank is integrating blockchain technology into cheques. Blockchain has the potential to significantly increase security and protection in banking transactions; the Cheque Chain initiative will dramatically reduce cheque fraud in the market, providing customers with greater peace of mind and security.
The launch of Cheque Chain comes months after Emirates NBD tested the feature in conjunction with the Central Bank of the UAE.
Emirates Islamic Bank plans to test the Cheque Chain initiative among its employees during a pilot phase, ahead of customer rollout later this year. The next stage of the Cheque Chain initiative will see the bank register each cheque leaf on its blockchain platform to validate the authenticity of cheques at their source.
In the first phase of the initiative, a unique Quick Response (QR) code will be printed on every leaf of newly issued chequebooks, making it difficult to duplicate cheques, thereby reducing fraud. In the following phases, the QR code will register each cheque on the bank’s blockchain platform, ensuring that once the cheque is received and cleared under the bank’s Inward Cheque Clearing System (ICCS), bank staff will be able to validate the cheque’s authenticity and have access to its source at all times. This will also enable the bank to validate the cheque’s authenticity once it has cleared its ICCS.
Additionally, a string of 20 random characters will be added to the magnetic ink character recognition (MICR) band of the cheque leaf using non-MICR ink.
The detailed timeline of the project is unknown. However, in my view, the Cheque Chain initiative is the beginning of a significant strategy by Emirates Islamic Bank to integrate blockchain technology into existing products and services. The objective is to implement global-best digital security systems in line with the digitisation of the bank’s products, processes and services.
In future, this solution could also involve a blockchain-based registry, a distributed database of verified customer data that all banks can access. When a customer approaches a new bank to open an account, the bank will be able to access their pre-verified information from their node on the blockchain.
– This article is reproduced with kind permission from GlobalData Financials. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Image by Supphachai Salaeman, Shutterstock.com